GEICO Auto renewal Premium Jump

[gfp]

16 minutes ago, Spekulatius said:

Seems to me that Todd Comps isn't the right CEO for Geico and they need to replace him with somebody else, who can figure this out. Todd started his CEO role in early 2020 (if I see this correctly) and it seems like things started to go downhill from there.

 

You may be correct that he's not the best person to lead the company, but I think the damage was done by Tony Nicely and Todd was brought in to fix what seemed like a real miscalculation with telematics where Ajit realized there was some major adverse selection going on.  It is going to take a while to fix this.  Luckily they have a rich parent and a patient shareholder base.

 

Incidentally, I had two more neighbors this week ask me what the hell was going on with GEICO after seeing their new premiums.  I told both to get a quote at PGR and I expect both to switch.

[Spekulatius]

37 minutes ago, gfp said:

 

You may be correct that he's not the best person to lead the company, but I think the damage was done by Tony Nicely and Todd was brought in to fix what seemed like a real miscalculation with telematics where Ajit realized there was some major adverse selection going on.  It is going to take a while to fix this.  Luckily they have a rich parent and a patient shareholder base.

 

Incidentally, I had two more neighbors this week ask me what the hell was going on with GEICO after seeing their new premiums.  I told both to get a quote at PGR and I expect both to switch.

You are  most likely correct. I would also point out that starting in early 2020 just when COVID-19 hit and all the operating ratios and loss ratios improving due to less driving, it would have been hard, if not impossible for a new CEO to figure out the the underlying issues before they clearly manifest themselves in the income statement.

 

That said, the lack of progress since 2021 when the COVID-19 effects started to wear off is bit frustrating.

[crs223]

On 4/17/2023 at 8:55 PM, longterminvestor said:

Match rate to risk.  I believe GEICO is getting the more risky drivers and has to price for that risk.  If Progressive is attracting more good insureds defined as people who are generally safer and ultimately file less claims, their individual premium charged will actually go down over time (Progressive calls this their "Discount Loyalty Program" or something like that) but more policies in force means Progressive is growing top line.  Conversely, GEICO is taking on clients who potentially could file more claims (the ones Progressive doesn't want), their rate charged needs to be higher.  GEICO is not "raising rate/premium for raising sake".  The premium is up for the individual policy because they are taking on an insured that is less predictable and the margin of safety needs to be included in the rate making formula - this is pure Buffett.  However top line is shrinking because they are losing long time customers.  

 

GEICO's entire premise is price, auto insurance is a commodity - policies are basically the same at personal auto level and loyalty comes with with getting best price - compete on price.  And very clearly, they are losing on price, and they are losing the better risks on price.  This is my point.  

 

GEICO barely puts out anything public as granular as you are asking for.  Here are the Numbers the way I see them:

GEICO premium 2020- $34,928B, 2021 - $38,395B, and 2022 - $39,107B - thats a 12% growth rate from 2020-2022

Progressive personal lines premium 2020- $32,620B, 2021 - $35,373B, and 2022 - $37,880B - thats a 16% growth rate from 2020-2022

 

Comping off 2020 with COVID skews numbers but its what I had infront of me - if you have more questions I can dig some more.  This is just the way I see it, I hope I am wrong for Berkshire, I hope they are figuring this out.  Just concerning how poorly Progressive is LAPPING GEICO.  

 

And Progressives number for Q1 YOY are at a 22% growth rate.  GEICO has not published Q1.  BUT premium written for GIECO in Q4 2022 YOY was actually down, less than last year, premium is shrinking, another way to call that is negative growth.

 

 

see slide deck from Progressive regarding attracting/retaining better drivers, this is public information:

 

see slide deck regarding Progressive premium growth:

 

been busy with my day job, sorry for the late reply.  Insurance in Florida is going nutty.  

 

I believe you are saying "because good drivers are moving to Progressive, therefore GEICO is mis-pricing their product".

 

I could charge $1 for unlimited auto coverage.  GEICO would lose all customers to me -- doesn't mean that GEICO is mis-pricing.

 

Q: What evidence do we have that Progressive is right and GEICO is wrong?

 

I'm not saying that GEICO is correct -- I have no idea -- I'm just trying to understand how the forum concluded that GEICO is mis-pricing their product.

[longterminvestor]

1 hour ago, crs223 said:

 

I believe you are saying "because good drivers are moving to Progressive, therefore GEICO is mis-pricing their product".

 

I could charge $1 for unlimited auto coverage.  GEICO would lose all customers to me -- doesn't mean that GEICO is mis-pricing.

 

Q: What evidence do we have that Progressive is right and GEICO is wrong?

 

I'm not saying that GEICO is correct -- I have no idea -- I'm just trying to understand how the forum concluded that GEICO is mis-pricing their product.

No, I am not saying GEICO is mis-pricing product.  I am saying GEICO has to increase the price of their product due to the type of drivers they are now getting due to Progressive getting/retaining better Drivers.  And GEICO has always won business on price alone, no other value proposition they offer - they are the low cost provider.  Where as Progressive allows independent agents to package the Progressive Auto with other lines of business.   

 

Progressive policy count/premium volume is growing and GEICO is shrinking as previously evidenced with financials and slides.  

Edited April 19, 2023 by longterminvestor

[crs223]

16 minutes ago, longterminvestor said:

No, I am not saying GEICO is mis-pricing product.  I am saying GEICO has to increase the price of their product due to the type of drivers they are now getting due to Progressive getting/retaining better Drivers.  And GEICO has always won business on price alone, no other value proposition they offer - they are the low cost provider.  Where as Progressive allows independent agents to package the Progressive Auto with other lines of business.   

 

Progressive policy count/premium volume is growing and GEICO is shrinking as previously evidenced with financials and slides.  

 

Thank you.  Perhaps Progressive’s price is too low, as in my $1 example above?  Why do you dismiss this possibility?  (I just want to understand your logic, I don’t have an opinion.)

[rogermunibond]

Are there any major geographic differences between GEICO and Progressive policies?  More East and West coasts for GEICO vs Progressive?

 

A few other factors maybe affecting GEICO more than Progressive.  Hyundai/Kia thefts (over the last year lack of electronic ignition safeguards has added a few points to auto theft rates nationally.  More new/young drivers - drop in mass transit usage due to covid.  More retired couples dropping two insured car households for one car, does this affect GEICO more than Progressive.

[longterminvestor]

1 hour ago, crs223 said:

 

Thank you.  Perhaps Progressive’s price is too low, as in my $1 example above?  Why do you dismiss this possibility?  (I just want to understand your logic, I don’t have an opinion.)

The whole point of this exercise is Progressive is the first one to price using real time driver feedback data that is fed into a super computer so my opinion, Progressive is getting the best data to make pricing decision.  Is it possible that they are underpricing, I guess.  I would tend to agree with you if this was some new kid on the block however Progressive is a proven stable VERY intelligent underwriter who has pioneered an entire new way to underwrite and price risk.   

 

I dont have much else on this topic.  

[crs223]

1 hour ago, longterminvestor said:

I would tend to agree with you if

 

FYI it’s impossible to agree with me… I’m not smart enough to have any opinion, I just wanted to understand your logic.

 

My understanding: Progressive has a new technology for pricing insurance which dictates lower premiums. GEICO, without this tech and without lowering premiums, is losing market share to Progressive.  Progressive is very intelligent and therefore is not underpricing their product.

[treasurehunt]

On 4/19/2023 at 8:53 AM, crs223 said:

 

I believe you are saying "because good drivers are moving to Progressive, therefore GEICO is mis-pricing their product".

 

I could charge $1 for unlimited auto coverage.  GEICO would lose all customers to me -- doesn't mean that GEICO is mis-pricing.

 

Q: What evidence do we have that Progressive is right and GEICO is wrong?

 

I'm not saying that GEICO is correct -- I have no idea -- I'm just trying to understand how the forum concluded that GEICO is mis-pricing their product.

 

I guess the evidence is that PGR had a combined ratio of 96% for 2022, while GEICO had a combined ratio of 104.8%. Since auto insurance is mostly a short-tail business, the combined ratio is probably a good indication of underwriting quality.

 

PGR's combined ratio did rise to 99% in Q1 2023 though.

[crs223]

3 hours ago, treasurehunt said:

 

I guess the evidence is that PGR had a combined ratio of 96% for 2022, while GEICO had a combined ratio of 104.8%. Since auto insurance is mostly a short-tail business, the combined ratio is probably a good indication of underwriting quality.

 

PGR's combined ratio did rise to 99% in Q1 2023 though.

 

Thank you! — That makes complete sense.

[My Own Personal Hedge Fun]

Interesting to hear people say good drivers are going with Progressive. I know independent agents who only use Progressive for the drivers with DUIs and other issues that more selective carriers reject. He's mentioned GEICO, State Farm, and others taking it on the chin recently with poor underwriting and noted that these increases would be coming as they try and recover. 

[gfp]

Progressive is finally starting to feel all those customers GEICO "shed" to them.  I was worried about PGR underwriting results for the near future when I heard so many stories of people switching to PGR instead of accepting price increases at their incumbent carrier.  

 

"

On the other hand, our first quarter 2023 CR was a 99.0, with March posting a CR of 106.2."

 

Q1 report

https://s24.q4cdn.com/447218525/files/doc_financials/2023/q1/Progressive-2023-Q1.pdf

 

There was also a conference call today, the transcripts are out there.  Not sure if any are free to link to.

[Grenville]

Thank you for the link!

 

Here is some of the commentary from the link: 

Quote

While not where we’d like to have started the year, there were a lot of factors that contributed to our underwriting results. During the first quarter, we experienced continued elevated loss costs due, in part, to our inflationary environment, reserving development, additional weather-related losses, and recent law changes in Florida that impacted loss estimates and prompted increases to our reserves. Loss costs emerged higher than we anticipated and prior accident year reserves developed unfavorably 4.6 points on the companywide CR. The majority of the unfavorable development related to fixing cars (property damage, collision, and comprehensive coverages) as the cost to fix vehicles continued to increase. Loss severity was up nearly 10% for the quarter, compared to the first quarter 2022, and similar to the year-over-year increase we experienced in the fourth quarter 2022, while frequency was relatively flat. In addition, catastrophe losses contributed 1.8 points to our first quarter 2023 companywide CR, compared to 1.2 points for the same period last year. In the first quarter 2023, we were affected by 24 catastrophic weather events, compared to 11 events in the first quarter of 2022, with the majority of the losses due to March storms. In response to the Florida tort reform that was signed into law in March 2023, we increased both our current and prior accident year loss reserves, which had less than a 1-point impact on our first quarter CR. As always, we will continue to evaluate and respond to our loss reserve adequacy.

 

Based on what I read, it doesn't seem like the new customers are impacting the CR, It seems to be more prior year accident reserve development. The March CR might be tied more to March storms and maybe past reserve development including the FL tort reform. Maybe the 10Q and the CC has more granularity around auto, but their auto direct premiums really jumped

[rogermunibond]

Interesting story.  So apparently tort reform in Florida has unleashed a wave of auto liability lawsuits in Q1 trying to get ahead of the reform law being signed by the governor.  Will eventually even out but Florida is apparently 10-15% of auto insurance claim lawsuits.

 

https://www.tallahassee.com/story/news/politics/2023/03/24/thousands-lawsuits-filed-florida-before-limits-kick-in-desantis/70045705007/

 

FT Alphaville has good coverage on the earnings calls from major auto insurers discussing their higher losses and increased premiums and reserves.

 

https://www.ft.com/content/91342a20-2125-4530-9ccb-52b3efd03078

[longterminvestor]

WSJ featured 2 articles on rising auto insurance cost as well.  

 

https://www.wsj.com/articles/auto-insurers-rising-rates-are-no-accident-11674589118

 

https://www.wsj.com/articles/car-insurance-rates-are-soaring-with-little-relief-in-sight-66138e2a

[Xerxes]

 

 

https://podcasts.apple.com/ca/podcast/focused-compounding/id1352422076?i=1000620161011

 

 

[pricingpower]

Also the new podcast referenced with GEICO history:

 

https://www.audacy.com/podcast/the-10-k-podcast-2facf/episodes

[boilermaker75]

Here is a video from a dash cam as a car is backing out and right at the end it is rear-ended. Who was at fault? Geico was the insurer for the car backing up and Farmers for the other car. I'm just curious what others think and then I'll later let you know the out come.

 

Edit: The speed limit is 10 mph in this garage and you can see the other car in the bottom right camera.

 

Edited July 13, 2023 by boilermaker75

[rogermunibond]

Progressive down 14% today after earnings.  Combined ratio coming in at 100.4.  

[boilermaker75]

17 hours ago, boilermaker75 said:

Here is a video from a dash cam as a car is backing out and right at the end it is rear-ended. Who was at fault? Geico was the insurer for the car backing up and Farmers for the other car. I'm just curious what others think and then I'll later let you know the out come.

 

Edit: The speed limit is 10 mph in this garage and you can see the other car in the bottom right camera.

 

 

 

 

OK, Farmers claimed their client had the right-of-way coming down the ramp. Geico, my insurer, told me it wasn't my fault but they would not take Farmers to arbitration. They would instead pay the $6,000! $5,500 for repair and $1,000 in rental vehicle minus my $500 deductible. 

[CorpRaider]

I suppose I should get a quote from progressive before renewing?

[boilermaker75]

On 7/14/2023 at 8:39 AM, boilermaker75 said:

 

 

OK, Farmers claimed their client had the right-of-way coming down the ramp. Geico, my insurer, told me it wasn't my fault but they would not take Farmers to arbitration. They would instead pay the $6,000! $5,500 for repair and $1,000 in rental vehicle minus my $500 deductible. 

 

GEICO reversed their position and ended up taking this to arbitration. The arbitration resulted in an 80/20 split, so I got $400 of my $500 deductible back. GEICO also gave me a letter that it was not my fault and would not affect my rates.

[collegeinvestor]

I personally switched to progressive over Geico about 50% less than Geico.

[Whensthepaintdry?]

Recently switched to auto insurers. Saved probably 30 percent with more coverage. 

[Blugolds]

Currently a Gieco customer, but am looking at Costco auto ins offers, seems like its about half the cost or so, anybody have any experience with Costco Ins offerings? 

 

https://www.costco.com/auto-home-insurance-services.html